Soothing client concerns about their investments during mergers

Let's face it, virtually no two firms have the precise same offerings. However, the partnership can work if the firms have complementary investment philosophies.

While today’s schizophrenic economic environment isn’t deterring advisory firms from partnering with consolidators, it is forcing advisers to make certain that any merger has a positive impact on their clients.

During acquisitions, advisers are keenly aware of the anxieties of their clients, whose two overarching concerns are whether they’ll get to keep their same adviser and what will happen to their investments.

Unless the adviser is retiring, the first concern is easily put to rest.

Investment fears are more nuanced. Because, let’s face it, virtually no two firms have the precise same offerings. However, the partnership can work if the firms have complementary investment philosophies. For example, if both believe in asset allocation, that’s a good foundation.

But it’s not only the bigger picture of asset allocation that allows you to cross client investment worries off the list. You also need to consider whether your future partner has both active and passive investment models, direct index offerings, separately managed accounts, ESG strategies, factor models and more.

When advisory firms seek a larger partner, they often do so to reduce their financial risk, to offload the tasks they don’t like doing and to focus on the things they love, such as growing their book of business and meeting with clients. And if that’s you? You might consider letting go of the investment reins. But to do so, you’ll need to make certain your future partner has an established process to help transition your clients’ investments.

For instance, what if you’ve built out an investment team and want to ensure it stays in place while leveraging the resources of that larger firm? In this situation, a key element to navigate is how your team is going to work with your new partner’s team. If you don’t figure out this relationship early, you could be stuck dealing with a devasting cultural misalignment.

It isn’t always obvious, but another thing you need to think through is what other investment services your partner firm will offer you, because you and your clients need more investment support than just help with portfolios.

For example, will your new partner be available to answer specific client questions or even meet with your clients if needed? Will they provide you with unique economic insights you can share with your clients? Do they have well-conceived marketing materials to help you calm nervous investors?

Ultimately, you need to align on philosophy, have an integration plan and be satisfied with their additional investment services. Lastly, while many advisers worry their clients will be troubled about virtually any change to their investments, there are a few mitigating factors.

First, your partner’s additional investment services should result in a better client experience. And second, virtually any change is only as big a deal as you make it. After over two dozen acquisitions in four years, what we’ve found is that if you’re happy with your new partner’s investment program, your trusted clients will follow your lead and feel comfortable, too.

Andy Stout is chief investment officer at Allworth Financial, a fee-based RIA with $15 billion in AUM.